Nomura: Tencent Music (TME.US) — Q2 Beat, Soft Q3 and FY2026 Guidance (2026-08-12)
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Key Views
Management cut its Q3 and FY2026 guidance. Q3 revenue is expected to rise 8% YoY to RMB9.1 billion, below expectations, with gross margin falling to 42.7% and non-IFRS net profit pressured to RMB2.34 billion. FY2026 revenue should grow 7% YoY, with adjusted net profit edging up 2% to RMB9.8 billion. H1 shareholder returns reached US$770 million via buybacks.
Outlook
Management guides Q3 net margin at 25.6% and FY2026 gross/net margins at 43.7%/27.7%. The US$600 million buyback authorization expires in March 2027, and new programs will be explored. Downside risks include loss of online-music user time and slower paying-user growth.
Recommended Securities
Tencent Music (TME US): Buy maintained, target price US$12.50; shares trade at only 10x 2026E P/E.